The HMRC’s recent tax crackdown targeting footballers and agents has resulted in the recovery of £70 million in 2023. The focus of the initiative has been on dual-representation contracts and the misuse of image rights.
This initiative has seen investigations launched into 20 football clubs, 83 players, and 21 agents since April 2023. The primary focus of HMRC’s efforts has been the misuse of dual-representation contracts and other tax avoidance strategies prevalent within football. These contracts allow agents to claim representation for both the player and the club during transfers, resulting in tax benefits that HMRC now challenges.
HMRC has tightened its guidelines, demanding evidence from clubs if they claim an agent worked for them during a transfer. Failure to provide such evidence could mean that the entire agent’s fee is treated as income for the player, subjecting it to income tax and national insurance. This stricter stance has already implicated several well-known figures in football, including former England internationals John Barnes and Emile Heskey.
Barnes was recently banned as a company director for failing to pay over £190,000 in taxes. Meanwhile, Heskey faced legal action over an unpaid £1.6 million tax bill related to a film investment scheme. The HMRC has also been vigilant about the ‘over-aggressive’ use of image rights, where players form limited companies to handle payments for their image rights, often resulting in lower tax rates.
The tax authority frequently investigates cases where it believes the value of a player’s image rights is inflated or unfounded. According to Elliott Buss, a partner at UHY Hacker Young, the football industry remains a prime target for HMRC, especially concerning the correct reporting of agent fees and educating young players about their tax responsibilities.
Buss noted that younger players, often earning substantial salaries, may be unaware of their obligation to file tax returns, making them vulnerable to fines and investigations. Over the past five years, HMRC has recovered £384 million in unpaid taxes from the football industry, with £67.5 million recouped in 2023 alone.
This crackdown is part of a broader effort to ensure compliance and deter tax evasion within the sport, following high-profile cases of tax fraud involving international stars such as Lionel Messi and Javier Mascherano in Spain.
The HMRC’s stringent measures signal a clear warning to the football industry about tax compliance. By targeting dual-representation contracts and the misuse of image rights, HMRC aims to promote transparency and accountability within the sport.